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I 3. opportunities to generate
n today’s dynamic banking
revenue through these features.
Increased Operational Costs:
landscape, where customer
Inefficient use of core banking
expectations are constantly
software can lead to manual
evolving, the choice of a core
operational costs.
Maintenance and Support:
4. workarounds and increased
banking provider is a pivotal Financial institutions typically
pay maintenance and support

decision for financial institutions. The fees for their core banking Ben France is the Director of
software. If the software is not Business Development for Smiley
core system serves as the backbone fully utilized, these fees may not Technologies, Inc., an ACB
be justified. Associate Member. Ben may be
of your operations, impacting 5. Compliance Costs: Non- reached at
everything from customer service to compliance with regulatory bfrance@sibanking.com
requirements due to
your institution’s bottom line. underutilized features can lead to fines and legal costs. Core
banking systems often include features for compliance reporting
and monitoring that, when unused, can result in compliance risks.
However, when evaluating core banking vendors, it’s crucial to 6. Training Expenses: If employees are not trained to use all aspects
remember that not all providers are created equal. It’s never an apples- of the core banking software, additional training costs may be
to-apples comparison so details such as support structure, pricing, and required to ensure effective utilization. Some vendors even charge
development timelines, should be carefully examined. for training videos.
7. Customer Service and Satisfaction: Underutilization can affect the
The Hidden Costs of Underutilized Software quality of service provided to customers. This can result in
As the banking industry embraces digital transformation, the demand customer dissatisfaction and potentially lead to customer attrition,
for cutting-edge software solutions is greater than ever. Yet, a surprising which has its own associated costs.
trend has emerged: organizations will overspend $750 million on 8. Data Management Costs: Core banking systems often have tools
unused IT software features this year alone, according to CIO Magazine, for data analytics and reporting. When these tools are
citing analyst firm Gartner. Another report by SaaS management underutilized, financial institutions may miss opportunities for data
platform Zylo found that companies waste more than $17 million on -driven decision-making, potentially impacting the institution’s
unused or redundant software applications each year. competitiveness and bottom line.
9. Security Risks: Incomplete use of security features within the core
But it’s not just in the broader IT landscape that this waste exists. There banking software can leave the institution vulnerable to
are specific costs related to underutilized core banking software and cybersecurity threats, potentially resulting in data breaches and
financial institutions should be aware that while some of these costs are associated costs.
hidden, they can quickly add up. 10. Scalability Challenges: As the institution grows, underutilized core
1. Licensing Fees: Core banking software licenses can be expensive, banking software may struggle to scale efficiently, requiring
and financial institutions often pay for user licenses or features additional investments in system upgrades or replacements.
that are not fully utilized. This represents a direct cost associated
with underutilization. Choose Wisely: Your Core Banking Partner Matters
2. Missed Revenue Opportunities: Underutilizing solutions for cross- Banks often underestimate the long-term impact of their core provider
selling and upselling financial products can result in missed choice and sometimes fall for unnecessary bells and whistles that either

A RKANSAS | 9 | Winter 2024
COMMUNITY BANKER